We won’t say that Goldman Sachs is at it again. Rather we will just say that they are still at it. Through deceptive manipulation, double-crossing, connections and insider information, the Golden Gangsta routinely pulls the strings of government and finance to squeeze the middle and collect at both ends. This time the bookends were State of California bonds and the credit default swaps sold on them.

Goldman used its influence to persuade the State of California to sell bonds while Goldman issued insurance (or credit default swaps [CDS]) against the default of those same bonds. But before selling the default swap, the bank conned institutional investors into selling those bonds, thus pressuring the bond prices down and the credit default swaps upwards. The bonds were no riskier after the price decline, but only Goldman knew that. This meant Goldman could gouge the State of California for a higher premium payment.

It could exaggerate people’s worries about our credit,” said Paul Rosenstiel, head of the public finance division of the treasurer’s office.

Such worries would tend to drive down the price of California bonds. That, in turn, would drive up the interest rate the state and its municipalities pay to borrow money. An increase of a single percentage point on a $1-billion bond issue would cost taxpayers an additional $10 million a year in interest.

That’s especially troublesome at a time of severe budget turmoil and tight credit. Gov. Arnold Schwarzenegger has warned that the state could run out of cash as early as February.

That exaggeration is market manipulation, and it represents cutbacks in education and other important services to the people of California. Why? Because the state paid an artificially higher premium for its insurance. It’s all fine and dandy to Goldman though. They went mum when they were asked about the details. Witness:

Some experts said the investment bank’s actions, while not illegal, might be inappropriate. “That’s not a good way to do business,” said Geoffrey M. Heal, professor of public policy and business responsibility at Columbia University. “They’ve got a conflict of interest and they’re acting against the interest of their customers. . . . You act in the interests of your clients. You don’t screw them, to put it bluntly.”

Goldman declined to discuss the details of its trading strategy. “We continue to support our clients and underwrite transactions,” spokesman Michael DuVally said in an e-mail response to written questions on Oct. 28. He said Goldman “as a firm” was no longer giving the trading advice to clients. He declined to elaborate.

Goldman’s strategy was embodied in a 58-page report presented to institutional investors in September. The document, stamped “Proprietary and Confidential,” was obtained by ProPublica, a New York-based nonprofit organization specializing in investigative reporting. This article was reported jointly by ProPublica and the Los Angeles Times.

He really didn’t need to elaborate and you can tell what those 58 pages are all about any way. It’s all in keeping with the Goldman strategy of using insider information and selling out your client just as they did in 2007 when they bet against the same subprime mortgages they sold to investors. This is the Golden mantra and the Gangsta is humming it melodically. And as for the law… let’s listen to California Treasurer Bill Lockyer tell us how that’s on the Gangsta’s side as well:

“Investment banks bring issuers and investors together,” he said. “Securities law has recognized the potential for a conflict of interest in playing both roles.”

Under the law, the solution is for the parts of the firm dealing with either side to be isolated from each other so that information does not improperly flow between them to benefit one set of clients more than another. There is no evidence that the wall was breached in this case. Assuming such protection was in place, Lockyer said that fear of market manipulation was unfounded.

Does that sound likeLockyer is on the gansta side too? Listen to this,

There is no evidence that the wall was breached in this case. Assuming such protection was in place, Lockyer said that fear of market manipulation was unfounded.

If you could stop laughing long enough you could see the evidence. Goldman sold the bonds and wrote the credit default swaps just as the bonds crashed, but did not default. No evidence? I’m still cracking up!

But look boyz and girls, all of us with three digit IQ’s know how Goldman was able to float the California bonds in the first place. The real CEO of Goldman Sachs, Treasury Secretary Uncle Hank Paulson, got Bush’s California buddy Arnie to push the bonds through Goldman and clearly Lockyer was brought on board. Then Goldman went out and did the bad mouthing of the municipal bonds, prices fell, and Goldman sold CDS’s on bonds with no increased risk. The Gansta cleaned up.And you could not be so convinced of Arnie’s role in this if he hadn’t built a track record for himself when he tried so hard to terminate the state’s nurses’, teachers’, and firefighters’ pension plan to serve it up to Wall Street in similar fashion.

Schwarzenegger’s first step was to reward corporate backers in the health care industry by suspending a hard-won law that lowered patient-to-nurse ratios in the state’s hospitals and emergency rooms.

But Schwarzenegger had at most a small role in this gig. It was most likely Hank’s show all along.